The Wicked Smart Investor: Foster a relationship worth celebrating

Thursday

It was a bit of poetry that caused quite a stir amongst the Boston Brahmin. At a Holy Cross Alumni dinner in 1910, Dr. John Collins Bossidy offered this toast:

And this is good old Boston,

The home of the bean and the cod,

Where the Lowells talk only to the Cabots,

And the Cabots talk only to God

The Wicked Smart Investor hopes the wealthy Lowells and Cabots spoke to their investment advisor as well. Then again, maybe the aristocratic family did not know what to expect from an investment advisor. After all there were not Youtube videos and “For Dummies” books around to educate us. For your benefit, and maybe for some of the old-moneyed Bostonians, I will lay out what your expectation of an investment advisor should be.

1. It’s all about you. Don’t accept any advice from an advisor that does not put you first. There are advisors that push products that offer them a high commission but eat up your return. To avoid this situation all together, hire a fiduciary. A fiduciary has a legal obligation to put your financial well-being ahead of his interest.

2. Advisors help you create realistic financial goals. A good advisor will give you the correct answer, not the answer you want to hear. It may be a tough pill to swallow but advisors create financial plans, not fairytales. One day, you’ll be thankful the plan was not based on far-fetched expected returns. Despite some initial unease you’ll eventually sleep better at night.

3. Unemotional advice. Our hard-earned money is a loved one; we don’t want to lose it! Yet, if you invest too conservatively it’s likely you will not have enough to retire. A good advisor will assess your risk tolerance and steer you toward only compensated risks. Your nest egg will grow faster.

4. Education. You probably will never be an expert in financial matters but a good advisor should provide you with a basic understanding of how your money is invested. There should be no black box. It’s quite fulfilling when a client says to me “You said…” That means they have learned something and have the basis to appreciate my value. This education is ongoing.

5. Regular communication. Feeling that your advisor is always thinking of you is comforting. Communicating with email and phone calls at least quarterly and an annual meeting is very typical. However, if you feel comfortable meeting more often just let the advisor know. A good advisor is flexible.

6. Reasonable fee. If an advisor did not charge you anything, how good would their advice be? If you want great service, you must expect to pay for it. After all, you are enjoying the benefit of your advisor’s education, experience and research. Maybe you can get financial advice from your beloved Uncle Harry for free, but that could be penny wise and pound foolish.

7. Professional referrals. Many advisors specialize in certain areas, which means in order to service your account properly, they must refer you to other professionals. You may be referred to an estate planning attorney, a tax accountant or a reputable insurance broker. These referrals are intended to protect your assets from various perils.

So there you have it, a guide to a beneficial relationship with an advisor. Also, I’d be remiss if I did not mention Dr. Bossidy’s relationship with the city of Boston. This distinguished ophthalmologist housed his practice in the swankest of Boylston Street’s medical buildings, yet spent a lot of time treating the needy at Boston City Hospital. Let’s raise a glass for and offer a toast to the good doctor.

Chris Hanson is a South Shore resident and CPA specializing in financial planning at Lindner Capital Advisors in Hanover. He earned his BBA at the Isenberg School of Management University of Massachusetts and a BA at Babson College’s F. W. Olin Graduate School of Business.